Bitcoin Sell-Off Slams Retail Traders as Strategy ETFs Crash 80% and Company Builds $1.44 Billion USD Reserve

December 2, 2025 – NEW YORK / SINGAPORE

Bitcoin’s latest slide is turning into one of the harshest wake‑up calls yet for leveraged crypto traders and fans of single‑stock ETFs tied to Bitcoin giant Strategy Inc. Nearly $1 billion in leveraged crypto bets have been wiped out in just one session, while the most aggressive Strategy‑tracking ETFs have tumbled about 80% this year—and that’s before the company itself warned that 2025 could still end in a multibillion‑dollar loss. ^[1]

At the centre of the storm is Strategy’s decision to create a $1.44 billion US dollar reserve to reassure bond and preferred‑stock investors that it can keep paying dividends even if Bitcoin keeps falling. The move effectively turns the Bitcoin‑heavy software group into a kind of hybrid crypto/credit machine—and highlights just how intertwined retail speculation, leveraged ETFs and corporate treasury strategies have become. ^[2]

A brutal December start: $1 billion in leveraged bets wiped out

Monday’s trading session (Dec. 1) delivered another jolt to crypto markets:

Bitcoin fell as much as 8% to around $83,824, extending its drop from early October highs near $126,251 to almost 30%.
Ether slid roughly 10% to about $2,719, and is now down about 36% over the past seven weeks.
An index tracking the smaller, more speculative half of the largest 100 digital assets is down nearly 70% for 2025, underscoring the pain in altcoins. ^[3]

In the 24 hours around that move, almost $1 billion of leveraged positions across major crypto exchanges were liquidated, according to data compiled by derivatives tracker Coinglass and reported by Business Times/Bloomberg. ^[4]

This comes on top of an even larger “liquidation cascade” in early October, when roughly $19 billion in levered bets were flushed out shortly after Bitcoin set a fresh all‑time high. That earlier wipeout was triggered in part by renewed tariff threats from US President Donald Trump, which rattled risk assets globally and helped set the stage for today’s extended sell‑off. ^[5]

Traders describe the mood as decisively “risk‑off”: spot Bitcoin ETFs have seen about $4.6 billion in net outflows over the past month, with only a modest $70 million coming back in last week—far from the wave of dip‑buying some bulls were hoping for. ^[6]

Strategy at the epicentre: stock down 60%+ from recent highs

Few companies are more exposed to Bitcoin’s swings than Strategy Inc, the Nasdaq‑listed software and analytics group that has reinvented itself as the world’s largest Bitcoin Treasury Company. The firm now holds around 650,000 BTC, or roughly 3.1% of the total 21 million coin supply, financed largely through a mix of debt, preferred stock and repeated equity issuance. ^[7]

That high‑octane model looks far more precarious with Bitcoin back below $90,000:

Strategy’s share price has fallen about 41% in 2025, according to the Financial Times, and is more than 60% below its recent peak. ^[8]
The stock dropped 34% in November alone, and is now roughly 66% below its November 2024 all‑time high, based on calculations cited by Business Times/Bloomberg. ^[9]

A key focus for investors is Strategy’s own valuation metric, “mNAV” (market net asset value), which compares the firm’s enterprise value with the market value of its Bitcoin holdings. That premium has largely evaporated:

Business Times reports the ratio has slipped to roughly 1.1–1.2, well below previous levels.
Strategy executives have previously suggested that if mNAV fell below 1.0, the company might eventually have to sell some Bitcoin—something long seen as a last resort for a business built around a “never sell BTC” ethos. ^[10]

With that backdrop, Monday’s announcement of a large US dollar reserve looks less like a cautious tweak and more like a survival‑level recalibration of the entire Strategy playbook.

The $1.44 billion USD reserve: a “fortress” for dividends and debt

On December 1, 2025, Strategy announced it had created a $1.44 billion “USD Reserve” specifically earmarked to pay dividends on its preferred stock and interest on its debt. ^[11]

Key details from the company’s press release and regulatory filings include: ^[12]

The reserve was funded entirely by selling new Class A common shares via an at‑the‑market (ATM) offering program.
Strategy’s “current intention” is to keep enough cash in the reserve to cover at least 12 months of these payments.
Management says the reserve already covers about 21 months and they aim to build it to 24 months or more over time.
The company retains full discretion to adjust the reserve based on market conditions and liquidity needs.

In a statement, founder and executive chairman Michael Saylor framed the move as the next step in Strategy’s evolution, positioning the firm as the world’s leading issuer of “Digital Credit” while maintaining its massive BTC reserve. ^[13]

Further analysis from Barron’s underscores the scale of the problem Strategy is trying to solve: the company faces more than $700 million a year in preferred dividend obligations, and has about $8.2 billion of convertible and other debt tied directly or indirectly to its Bitcoin strategy. The USD reserve is designed to pre‑fund those obligations without touching the company’s 650,000‑coin BTC hoard. ^[14]

Guidance reset: from $24 billion dream to a wide band of uncertainty

The reserve announcement came alongside a major reset of Strategy’s 2025 financial guidance. When the firm last issued targets in late October, it assumed Bitcoin would finish 2025 at $150,000, roughly in line with the then‑consensus forecast from research analysts. ^[15]

With Bitcoin now hovering around $85,000, Strategy has switched to a more realistic year‑end BTC range of $85,000–$110,000. Under those assumptions, the company now projects for fiscal year 2025: ^[16]

Operating income (loss): between –$7.0 billion and +$9.5 billion
Net income (loss): between –$5.5 billion and +$6.3 billion
Diluted EPS: between –$17.00 and +$19.00 per share

That is a dramatic comedown from earlier internal scenarios that envisioned up to $24 billion in net income if Bitcoin had continued to rip higher. ^[17]

One reason the ranges are so wide: Strategy has adopted new US accounting rules for crypto (ASU 2023‑08) that require Bitcoin holdings to be marked to fair value with gains and losses flowing straight through the income statement each quarter. In practice, that means earnings are now almost mechanically tied to the BTC price, amplifying volatility in both directions. ^[18]

Retail traders crushed as leveraged Strategy ETFs plunge 80%

While Strategy’s balance‑sheet engineering may support bondholders and preferred stock investors, retail traders in leveraged Strategy ETFs are already deep underwater. According to data compiled by Bloomberg and reported in The Business Times: ^[19]

The two most popular funds, MSTX and MSTU, are 2x leveraged ETFs that aim to deliver twice Strategy’s daily move. Both are down more than 80% in 2025, putting them among the ten worst‑performing ETFs in the entire US market this year.
A third product, MSTP, launched during the mid‑year crypto euphoria, is down by a similar magnitude since its June debut.
Combined assets across MSTX, MSTU and MSTP have shrunk from over $2.3 billion in early October to about $830 million today, implying roughly $1.5 billion in capital evaporated in less than two months.

Those losses land primarily on retail investors, who flocked to these products as a simple way to turbo‑charge bets on Bitcoin without opening a margin or futures account. Issuers such as Defiance, Tuttle Capital Management and GraniteShares rode an initial wave of demand, but have now seen their flagship Strategy‑linked funds migrate to the very bottom of performance tables. ^[20]

Analysts warn that these vehicles stack multiple layers of leverage on top of each other:

Strategy itself uses debt and preferred stock to accumulate Bitcoin.
Its common equity becomes a kind of leveraged call option on BTC.
Single‑stock ETFs like MSTX and MSTU then provide daily 2x exposure to that already leveraged equity.

In choppy markets, the daily rebalancing and volatility decay typical of leveraged ETFs can chew up returns even if the underlying stock ends a period roughly flat. When the stock goes into a sharp downtrend—as Strategy did in November—the compounding effect can turn a 34% monthly drop in the stock into an 80%+ collapse in the ETF. ^[21]

Index risk, funding stress and the future of the “Bitcoin corporate” trade

Beyond immediate share‑price pain, Strategy now faces longer‑term structural questions:

Index membership risk: JPMorgan analysts have warned that Strategy could eventually be removed from major equity benchmarks such as the MSCI USA and Nasdaq 100 if volatility stays elevated and the market cap continues to slide. That could trigger billions in passive outflows from index funds and ETFs that currently hold the stock. ^[22]
Funding costs: Even before the latest moves, Strategy had already raised the coupon on its Series A perpetual “Stretch” preferred stock to 10.75%, a sign that investors are demanding higher compensation for risk. ^[23]
Reliance on equity markets: The new USD reserve is entirely funded by selling common shares. If the share price remains depressed or liquidity dries up, Strategy’s ability to raise more cash without severely diluting existing shareholders could be constrained. ^[24]

For now, the $1.44 billion reserve buys breathing room. It reassures creditors that Strategy can meet its obligations for at least a year without liquidating Bitcoin, and it shores up confidence in a funding model that had begun to look stretched. But it also formally acknowledges what the market already knew: this is no longer a pure “Bitcoin rocket‑ship” story, but a complex interplay of crypto exposure, leverage and credit risk.

Macro backdrop: central banks, tariffs and fading ETF flows

The crypto rout is not happening in a vacuum. Recent market moves reflect a broader shift in global risk appetite:

In Japan, comments from Bank of Japan governor Kazuo Ueda have been interpreted as the clearest hint yet of a coming interest‑rate hike, pushing the yen higher and local equities lower. ^[25]
In the US, investors are recalibrating expectations around the Federal Reserve’s rate‑cutting path into 2026, while also digesting President Trump’s renewed focus on tariff threats—a key catalyst for October’s first big crypto liquidation episode. ^[26]
US spot Bitcoin ETFs are seeing subdued demand, with only small net inflows last week after a month of heavy outflows, undercutting the narrative that institutional buyers would always step in to “buy the dip.” ^[27]

All of this has made it harder for high‑beta trades like Strategy and its related ETFs to find natural buyers on the way down. With both macro headwinds and crypto‑specific leverage risks aligned in the same direction, the path of least resistance has been lower.

What today’s chaos means for retail investors

For everyday traders, the events of December 2, 2025, offer several hard lessons:

Leverage cuts both ways
Products that promise 2x or 3x daily exposure can deliver outsized gains during sustained rallies, but they are not designed as long‑term HODL vehicles. In sideways or volatile markets, daily rebalancing can steadily erode value. ^[28]
Stacked leverage is especially dangerous
Owning a leveraged ETF on a company that itself uses leverage to buy a volatile asset creates a multi‑layered risk pyramid. When conditions turn, losses can be swift and severe—as MSTX, MSTU and MSTP investors are now discovering. ^[29]
Corporate Bitcoin strategies are not risk‑free “proxies”
Strategy’s evolution from a software company into a Bitcoin‑heavy treasury vehicle has inspired imitators worldwide. But its current guidance—swinging from a potential $5.5 billion loss to a $6.3 billion profit depending largely on BTC’s year‑end price—shows just how unstable earnings can become when a single asset dominates the balance sheet. ^[30]
Cash buffers matter—even in the age of “digital gold”
The very need for a $1.44 billion dollar reserve undercuts the idea that Bitcoin alone can serve as a corporate safety net. Even the most vocal BTC bulls are conceding, in practice, that old‑fashioned cash remains essential when meeting fixed coupon and dividend obligations. ^[31]

What to watch next

As markets digest the latest headlines, several signposts will determine whether this episode stabilises or escalates:

Bitcoin support around $80,000: Traders cite this level as the next key technical support. A decisive break lower could trigger another wave of liquidations and renewed pressure on Strategy and its ETFs. ^[32]
Flows into and out of spot Bitcoin ETFs: Persistent outflows would signal ongoing institutional caution; a sustained return to net inflows could help put a floor under prices. ^[33]
Strategy’s mNAV and index status: If the valuation metric drifts towards or below 1.0 and index providers revisit the stock’s eligibility, the resulting passive selling could intensify volatility. ^[34]
Further balance‑sheet moves: Investors will be watching whether Strategy expands the USD reserve, taps new forms of financing, or—if conditions worsen—finally contemplates selling part of its Bitcoin position, breaking a long‑standing taboo. ^[35]

For now, the combination of a sharply lower Bitcoin price, nearly $1 billion in liquidated leverage and 80% drawdowns in the most speculative Strategy ETFs has brought a years‑long boom in “leveraged crypto everything” to a painful pause.